Pentagon (Photo by Newscom)

The Obama Administration has been quick to point out that it has exempted the defense budget from its proposed freeze on other elements of discretionary spending in its budget. While the Administration has announced in the budget that it is requesting a $33 billion supplemental appropriation for defense in the current fiscal year and is providing modest real growth in the overall defense budget in fiscal 2011 over its new fiscal 2010 baseline, the five-year defense budget is well below “freeze” levels.

This is because it proposes to reduce the defense budget by about $92 billion from fiscal 2011 levels in fiscal 2012. This is a roughly 12 percent current dollar reduction in a single year. The overall defense budget would then see modest real growth annually for the remainder of the five-year program (through fiscal 2015), but only from the levels set by the draconian cut proposed for fiscal 2012. Defense increases following defense cuts cannot reasonably be considered increases.

Expressed as share of the economy or gross domestic product (GDP), the overall defense budget will decline rapidly from a new estimate of roughly 4.9 percent of GDP in the current fiscal year to 3.6 percent of GDP in fiscal 2015.

The Obama Administration is going to point out that the core defense program for the Department of Defense (DOD) will see real growth in fiscal 2011 compared to fiscal 2010. Modest real growth will continue in the Department’s core budget thereafter, based on a placeholder $50 billion annual expenditure for overseas contingency operations (OCO). The massive decline in the projected funds for OCO, however, makes it all but certain that these operations will increasingly be funded at the expense of the core defense budget. Indeed, DOD’s core program will fall from about 3.9 percent of GDP in the current fiscal year to just 3.2 percent of GDP in fiscal 2015.

The defense budget that the Obama Administration has proposed is too small. In the coming years, this will require some combination of the following steps:

1) reducing military manpower levels;
2) reducing force structure;
3) reducing operational capacity;
4) scaling back modernization plans; and
5) reducing military compensation.

Based on past experience, it appears that the Administration is most committed to cutting back modernization. This is the same area that suffered from the “procurement holiday” of the 1990s. The option the Administration is least likely to pursue is restructuring military compensation. Regardless of which combination of steps the Obama Administration takes, this defense budget means that the security commitments of the U.S., both to itself and its allies, ultimately will have to be scaled back. If it refuses to admit that at least some key U.S. security commitments will be withdrawn under this budget, the Obama Administration will be making the nation’s security policy a form of bluff.

Click here for more analysis on the 2011 Budget.